Investment for development

OECD, WTO and UNCTAD renew calls to G20 to resist protectionism

8/3/2010 - The OECD, World Trade Organization and the UN’s Conference on Trade and Development have called on the leaders of the G20 countries to resist protectionism or the prospects for economic recovery may be wiped out.

In their second combined report on G20 Trade and Investment Measures, the three organisations find that most G20 members are holding to their commitments to open trade and investment in the wake of the global economic crisis. However, they say protectionist pressures may continue to gather force in the face of job losses and high unemployment.

The OECD, co-author with UNCTAD of the report’s chapter on investment, says there was no open discrimination against foreign investors in the six months to mid-February 2010, but warns that discretion in the application of the many state support and rescue programmes for troubled firms may be used to favour domestic companies and disguise protectionism.

OECD also contributed analysis of the economic and trade effects of the different measures taken in response to the crisis. This provides insights into how crisis measures might be designed to be both pro-growth and pro-trade. An optimal sequencing of pro trade and pro growth exit strategies is put forward beginning with removal of border protection, than discriminating provisions in domestic measures, followed by sectoral measures, and finally general consumption incentives.

The report cautions that the holdings acquired by governments as a response to the crisis may jeopardise governments’ impartiality in policy making and law enforcement. Government ownership and rescue of firms may also distort and protract restructuring of economic sectors. It also notes that recent G20 investment measures have continued to point towards greater openness and clarity for foreign investors. The OECD’s own investment instruments strengthen countries’ resistance to protectionism.

OECD Secretary-General Angel Gurría said: “Openness to international investment is a precondition for strong global economy, job creation, and innovation. The OECD will continue to monitor investment policy developments closely.”

The leaders of the G20, which comprises the world’s largest economies, committed to resist protectionism and promote global trade and investment at summits in November 2008, in April 2009 and again in September 2009. They mandated WTO, OECD and UNCTAD – the leading international organisations in the area of international trade and investment policies – to monitor policy developments and report publicly on these commitments.

This second report to G20 leaders covers measures taken or announced by G20 members between 1 September 2009 and mid-February 2010. The previous report was issued ahead of the G20 Summit in Pittsburgh in September 2009.